Question

Compare the balance sheets (composition of assets and liabilities) of banks and money market mutual funds(MMMF). How are they similar and how are they different?

Answer 1

The balance sheets of the Banks consist of deposits from its customers as the primary liabilities and these can be in the form of term deposits or savings and short term deposits. While the capital infused by the promoter of the bank form the equity portion and thus the liabilities and equity portion is covered.

On the asset size of a bank, the primary items are investments made by the bank in certain deposits and advances made by the bank to retail and corporate customers.

In case of money market mutual fund, the assets size consists of investments made in money market instruments such as short term corporate deposits and even government securities. The liabilities and equity side consists of deposits taken from invesors and capital put in by the fund house.